Trade credit and productivity: evidence from China’s ethnic areas

Using 2004–2009 firm-level microdata for enterprises in China’s ethnic areas, we investigate whether trade credit really works as an alternative external financing source. We find statistical evidence that trade credit is positively correlated with enterprise productivity; the result continues to hold when taking into account the intermediate role of the working capital turnover ratio. Moreover, our results confirm the positive impact of bank financing on enterprise productivity. All these findings are particularly tenable for Han enterprises.     

Production efficiency and its spatial disparity across China’s TVEs: A stochastic production frontier approach

The development of China’s township and village enterprises (TVEs) in recent years is beyond doubt encouraging. However, it is uncertain whether or not this rapid development is exacerbating China’s spatial disparity by encouraging inequality of production efficiency across these enterprises. By using the stochastic production frontier model with a simple exponential specification of time-varying firm effects, which incorporates panel data, this paper aims to answer this question by examining the changes in production efficiency of the TVEs located in different provinces between 1988 and 1993, with particular reference to the spatial disparities of these changes. The findings of this paper indicate that the production efficiencies of the TVEs, on average, improved between 1988 and 1993. Furthermore, the results also show that regional inequality, in terms of production efficiency across the TVEs located in different provinces, had narrowed in the six years under study. JEL classification: C33; D24; 011; 047     

Race: China’s Question and Problem

Race poses a challenge to the ruling Communist Party of China. Contemporary news reports about China’s relationship with various African states warn of a reestablishment of 19th century colonial relations, with China standing in the shoes of England or France. When indictments of neo-colonialism are promoted, China recalls a historical brotherhood with African states under the banner of Third World solidarity. This paper attempts to shed light on both sides of this argument, demonstrating that for China, the issue of race in foreign relations poses both a question of motives and a problem of national identity.     

China’s macroeconomy: main challenges and countermeasures*

At the turn of the twenty-first century, the Chinese economy has become a leader from a complete follower in some industries. Thus, without innovation, it will be difficult for China to keep improving its technology further in the twenty-first century. Under the situation that ‘cash is of paramount importance’, the expansionary monetary policy leads to an increasing liquidity. People, with more money at hand, are prone to invest in stocks rather than in industries because it could be harder to withdraw their money from long-term investments. This phenomenon leads to bubbles in stocks and real estates in China. Based on the current situations, Professor Wu advocates an inclusive tax cut policy, as one of the biggest problems many Chinese entrepreneurs face is a lack confidence in the future. The main function of the government is to provide public goods, not to manipulate the market, intervene in the micro economy or ‘adjust the structure’ directly.     

Parental socioeconomic status and children’s cognitive ability in China

It is widely recognized that intergenerational transmission is one of the primary causes of persistent social inequality. Using nationally representative data, the China Family Panel Studies, this paper is one of the first to comprehensively investigate parental SES and children’s cognitive outcomes in China and moves beyond existing work by accounting for the direct intergenerational transmission of cognitive ability and by examining various novel mechanisms. Our results show that parents’ education rather than income is positively associated with their children’s cognitive abilities. The analysis of mechanisms shows that educational disparity widens the gap in parental investment, as well as parental beliefs regarding education and expectations for their children. Nevertheless, we do not find differences in parenting productivity. In addition, we find that the impact is more prominent in rural areas where education resources are much more limited. Various tests have been performed to prove the robustness of our findings.     

Shadow banking,macroprudential policy,and bank stability: Evidence from China’s wealth management product market

This study examines whether shadow banking activities reduce the stability of 269 commercial banks in China, and if they do, whether a tightening macroprudential policy could mitigate this negative effect. A quarterly bank level, unbalanced panel data of wealth management products (WMPs) from 2006 to 2018 measured China’s shadow banking activities. The results show that China’s shadow banking activities weaken the stability of banks, especially for principal-floating WMPs, long-term WMPs, and WMPs issued to individual investors. China’s macroprudential supervision improves the soundness of banks and eases the negative effects of shadow banking on banking stability. Our results suggest the necessity to design specific macroprudential policies based on different kinds of shadow banking activities and different types of banks.     

China’s macroeconomic trends in downward pressures: the ‘micro stimulus’ effects and steady growth

This study reports China’s macroeconomic trends in downward pressures and discusses the effects of the ‘micro stimulus’ on the growth performance of Chinese economy. It appears that economic growth rebounds significantly in the short term every time ‘micro stimulus’ is applied, but the economy slows down again once the stimulus dwindles. China’s economic growth thus exhibits a pattern of significant ‘stimulus-dependence’. When facing economic downturn, China has only resorted to stimulus policy to sustain growth. Not surprisingly, our findings indicate that ‘micro stimulus’ cannot realize the strategic intent of growth stabilization and structural adjustment, and may even lead to more structural chaos. One problem that can be attributed to the near-sighted strategy is the worsening productivity performance since the financial crisis of 2008. Therefore both improvement in social security systems and social programs designed for maintaining long run growth are needed in order to improve productivity performance on the one hand and to facilitate structural adjustments on the other.     

China’s expansion of higher education: The labour market consequences of a supply shock

In the decade 1998–2008 China expanded enrolment in higher education almost six-fold. For the examination of its short term labour market consequences, this unprecedentedly huge and sudden policy change might be regarded as a natural experiment. After providing a theoretical framework for analysis, the paper uses urban labour market surveys to analyse how the labour market adjusted to the supply shock. Three outcomes are examined: the effect of the expansion on wages, on unemployment, and on access to ‘good jobs’. The shock is found to reduce relative wages, raise the unemployment rate, and reduce the proportion in good jobs, but only for the entry-year or entry-period cohort of graduates. The effect is fairly powerful for entrants, especially university rather than college graduates, but incumbent graduates are largely protected from the supply shock. An attempt is made to examine the labour market effects of the quantitative expansion on educational quality. The paper provides insight into the operation of China's labour market in recent years.     

Exchange rate regime switching in Malaysia and Singapore in response to China’s move to a basket peg: A DSGE analysis

Motivated by the observation that when China broke from its US dollar peg in 2005, Malaysia and Singapore likewise loosened their currency ties to the US dollar, this paper considers how these two countries might best respond to a hypothetical transition by China to a new basket peg regime. We specify five alternative exchange rate strategies that encompass fixed, basket, and floating regimes and gradual versus sudden transitions. To project outcomes for macroeconomic variables under these alternative regimes, we apply a dynamic stochastic general equilibrium (DSGE) model of a small open economy and incorporate exogenous shocks as actually occurred from 2005 Q1 to 2014 Q4. We then compare the strategies based on values of a cumulative loss function defined on the output gap, the inflation rate, and the real effective exchange rate. The exercise reveals that a gradual adjustment to a basket peg with long-term optimal weights is the first-best policy for both countries, where optimal weights are derived to minimize the loss function. Further, both a sudden shift to a basket peg with optimal weights and a sudden shift to a floating rate regime are superior to maintaining the dollar peg in Malaysia, but not to maintaining the existing basket peg in Singapore.     

China’s rule of law in New Era: the rise of regulation and formalism

ABSTRACT

China’s financial development and economic growth is achieved under weak legal institutions. The literature attributes this counterexample of law–finance–growth nexus to (a) alternative mechanisms in China such as incentives, reputation and relationships and (b) a well-functioning xinfang system with common law features. In recent years, China has made increasing efforts to strengthen its rule of law. The Communist Party of China (CPC) has taken the lead by launching a far-reaching campaign against corruption, establishing a system of inspection tours, and promulgating a large number of regulations. We argue that using regulations to complement laws is effective: CPC has enough bureaucratic prowess to crack down on corruption whereas the courts are subject to subversion by powerful interests. We also discuss the drawbacks of this approach: regulations aiming at ex ante control of corruption substantially increase procedural formalism and limit the discretion of local governments and state-owned enterprises.     

China’s Production Sectors: Achievements, Challenges and Further Reforms

I. Introduction Sustainable growth of the Chinese economy has always been a focal point of discussion. As noted by Guo Shuqing (2004), Yu Yongding (2005), and many other economists, the Chinese economy is facing a multiplicity of disequilibrium and constraints, such as a disproportionately low share of the service sector in the whole economy, continuous external imbalance of payments, unusually high investment rates, energy and environment constraints, a rapidly aging population, unfavorable…     

Consumption risk sharing and self-insurance across provinces in China: 1952–2008

This paper investigates the extent to which idiosyncratic shocks to the permanent income of various provinces in China were mitigated through the channel of provincial risk-sharing during 1952–2008. Taking into account the possibility of self-insurance through saving, we find that provinces in China shared roughly 38% of their idiosyncratic output shocks during the entire sample period. In particular, we show that conventional risk-sharing analysis in the extant literature that does not take into account the self-insurance channel tends to over-estimate the degree of risk sharing by implying a degree of risk sharing of around 54%. Moreover, in view of the major economic reforms that had taken place in the last few decades, we decompose the sample period into two sub-phases: the pre-reform period (1952–1978), the reform period (1978–2008). We find that there is a notable increase in the degree of provincial risk sharing in the reform period. The degree of provincial risk sharing across China is comparable to that across the OECD countries, but falls short of that among the states in the US.     

What are the possible future research directions for bank’s credit risk assessment research? A systematic review of literature

Banking prudence and efficiency to manage their risks in different business cycle and environment would help to alleviate crises and losses. Hence, the effective assessment of credit risk is an essential component of a comprehensive technique to credit risk assessment and critical to the long-run of not only banking institutions but also the economy as a whole. Therefore, it has received a great interest from scholars across finance and economics to investigate such assessments by banks in different countries using diverse theoretical underpinnings and methodologies. Hence, this paper is developed to review analytical conceptualisations of credit risks assessments that have been developed in the academic literature. By means of a systematic review, it provides a comprehensive analysis that encompasses approaches used in research papers. There has been no prior review on analytical conceptualisations in this area. Moreover, this review is done in a systematic manner, i.e. categorising journal articles into different categories such as purposes, perspectives and methodologies through a transparent and thorough process. Thus, it will be able to provide an objective review. Finally, the paper will outline the evolution of methodologies and theoretical underpinnings in credit risk management research and a landscape for possible future research directions.     

China’s Foreign Trade: Achievements,Determinants and Future Policy Challenges

I. IntroductionOver the past twenty-five years, Chinas foreign trade has undergone unprecedenteddevelopment. The total trade value increased from US$36 billion in 1978 to over US$700billion in 2003. The proportion of manufactured goods in total exports rose from less than onehalf in the early period to 90 percent in 2003. Manufactured exports also saw a significantstructural change. Apart from traditional major export items such as textiles and light industrialgoods, machinery and transport…     

Toward A Financial Architecture in East Asia： A Proposed Roadmap and China＇s Perspective

This paper provides with a proposed roadmap for strengthening financial architecture in East Asia. We discuss the goals, driving forces and obstacles in the short and medium run and correspondingly suggest possible steps that would be taken at different stages. A longterm vision is also briefly presented. The main points we have made are as follows. (1) An East Asia monetary union can be an ultimate long-term objective for the region. (2) In order to achieve this, we shall start with amending the current CMI mechanism and fostering the need of regional local currencies in trade and financial transactions through establishing regional bond market in the short-term. (3) A regional bond market with local currencies involved and a more stable exchange rate arrangement in a broader scope to emerge are likely in the medium term.